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Introducing David Swensen

February 08, 2007

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Yale University recently announced a 23 percent return on its investments, swelling its endowment to a whopping $18 billion. The man behind that investment success is David Swensen, one of the most gifted investors in the world. He's made an average 16 percent annual return over 21 years -- better than any portfolio manager at any other university.

David Swensen has been the Chief Investment Officer at Yale University since 1985. He is responsible for managing and investing the University's endowment assets and investment funds, which total about $18 billion. Realizing an annual return of more than 17.2 percent on his investments over the last ten years, Swensen has added more than $12 billion to Yale's coffers. Mr. Swensen also outperformed 99% of U.S.-based mutual funds.

He is chiefly notable for having invented what has become known as The Yale Model, a mechanism for Multi-Asset Class Investing. He purposely diversifies the portfolio across a broad range including typical stocks, bonds and real estate and timber, and private investments like venture capitals and leverage plans.

To get the highest long-term returns possible, Mr. Swensen says individual investors should be heavily weighted in the historically top-performing asset class, equities -- as he is. Individuals should also reduce risk by diversifying within equities, and across a variety of other asset classes -- as he does. But unlike him, instead of trying to pick individual securities, you should invest with low-fee index mutual funds or exchange-traded index funds (ETFs).

His take on mutual funds: “(In dividuals should not invest) in for-profit mutual funds. However, take Vanguard as an example. It's one of the not-for-profit mutual funds companies, using market matching funds and index funds, which we talked about earlier. That's a very small part of the mutual fund world because most of the firms are for-profit. Vanguard is not-for-profit. And most of the firms try to pursue these market-beating strategies in which they fail. Vanguard generally focuses on these market-matching strategies.”

He is author of the bestselling book, "Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment." His new book is "Unconventional Success: A Fundamental Approach to Personal Investment."

We have added Dr. David Swensen into our List of Gurus. Premium Members can build their own List of Gurus and discover the gems in the Consensus Holdings and Consensus Picks of their Personalized List of Gurus. Dr. Swensen’s latest equity holdings are here.


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